 QuickBooks Online 2024. Bank reconciliation reports month number two. Get ready and some coffee because we're going on air with QuickBooks Online 2024. Here we are in our get great guitars 2024. QuickBooks Online sample company five we set up in a prior presentation opening up the major financial statement reports as done every time going to the reports on the left in the favorites we're going to be right-clicking on the balance sheet to open Lincoln a new tab same with the profit and loss same with the trustee trial balance going up to those three tabs just opened closing up the hamburger for the balance sheet and changing the ranging 010124 tab 022924 tab dropping down running it to see the side by side tabbing to the right hamburger closing change the range 010124 tab 022924 tab dropping down to the months running it tabbing to the right repeating the process hand boogie close range change 010124 tab 022924 tab and month by month breakout running it let's go back to the balance sheet remembering that last time we have been working on the second month of the bank reconciliation a month that will be representative of future bank first a word from our sponsor yeah actually 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it down a bit okay it's an improvement if you would like a commercial free experience consider subscribing to our website at accounting instruction dot com or accounting instruction dot think of it dot com reconciliations because it should be pretty streamlined after we get past that first bank rec which has the issue with the beginning balance often times let's go to the first tab and see where we're at we're going to go to the transactions down below we're in the reconcile tab and I'm going to open up the prior bank reconciliation by going to the summary and then open up the let's go actually to the history by account and then I want to review or view the report I'd like to open it in a new tab so I'm going to go to the tab up top right click on it and duplicate it so then I can open it in a separate tab close in the hamburger view the report so this was the last bank reconciliation for the end of January the first month let's go back to the tab to the left and finish up the second month reconcile tab and we're going to resume the reconciliation resuming the reconciliation so let's see where we've ended up this was our information we put in the beginning balance we didn't put it in it rolled in from the prior period and then we put in the ending balance from our bank statement as of the cutoff date the end of February 229 due to the fact that it's a leap year and then we're going to go over here and say that this is going to be our statement balance which we typed in which we would like to be exactly matching the cleared balance which we can see we're off by the two cents the two pennies this down below represents what the cleared balance is it's the beginning balance and when I say beginning balance I don't mean the balance from last month because if I look at the balance on last month on our financial statements it was 88 645 27 that's not the number here we're looking at the cleared balance from last month the things that we checked off that have cleared the ones that haven't cleared are not in the cleared balance so if I look at my bank rec for last time then the cleared balance is the 61 241 85 that's the 61 241 85 then we have the payments so that also matches here 61 241 85 and the the payments 11 633 and the additions 51 981 so 11 632 89 or 98 in 51 981 20 now we're off by two pennies we're off by two pennies I'm going to close up this arrow I would like to know exactly what we're off by generally before I reconcile because note that if I was exactly on this would be a green button as we saw at the end of the first bank reconciliation and we would have the green light to go but even at two pennies off QuickBooks is saying no you shouldn't be reconciling at this point you might say well two pennies I don't care about two pennies it doesn't matter if I'm within two pennies then I'm good enough my cash is fine however the point of this process isn't just to get the cash account to be correct or close to the cash number so that we can be fairly certain that the cash balance is right but that we can get all the transactions in place so that so if we can get the exact difference then the idea is that that all the transactions that are that are making up the cash account are legitimate and that means that all the other side of the transactions with the double entry accounting system are also legitimate or at least should be entered they might be going to the wrong account or something there could still be errors but at least they should be properly included and that means the whole income statement basically is being is is part of basically the other side of the transaction in other words this two pennies could be a result of like five deposits and 20 checks that happened to net out to two pennies so in our case we know exactly what that is though because we know we saw that it was the paychecks which are a result of our of our practice problem because the state tax has kind of threw us off in a rounding we have a rounding error of two pennies so I know exactly what the difference is so I'm going to say I'm okay with that now and I also want to kind of show what will happen if we go ahead and reconcile even though we're off by the two pennies also note that the things that are not checked off here are possibly not a problem because those are things that we know about that the bank doesn't know about therefore when I make the actual report from this these unchecked off items will be the reconciling items the outstanding checks and deposits if I look at this this first one is kind of concerning because notice that one we wrote in January it still hasn't cleared all the way through February so that might mean that there's that check is not legitimate or it got lost in the mail or it got entered twice or something like that that's one of the reasons we do the reconciliations however it's a little bit tricky to to we can't just delete that check now right because we've already reconciled the prior month and we might have finalized the prior month financial statements which already recorded the supply's expense in the prior month so we talked about in a prior course or section on the voiding of checks and the proper way to void checks you want to be careful like voiding the check if you find that you don't think it's ever going to clear because it got entered twice or it got lost in the mail right these ones though the deposit happened on 227 228 228 and so on all of these look like they're at the end of the month and we would think they possibly would simply clear in the following month of March which we can check by going to the bank statement and seeing if they do indeed clear in March and if they do then their legitimate timing differences that will be part of our reconciliation report all right so let's do it let's hit the drop down and i'm going to say finish now so i'm going to force it and it says hold on your difference isn't zero yet so you aren't ready to to reconcile yet because your transaction and quickbooks don't match your statement so you haven't cleared the level you're trying to you're trying to cheat but so so when they match you'll have a difference of zero so if you'd like to process confirm the following below and then click add adjustment so they're basically we're cheating here to do this and so you don't typically want to do this but i want to kind of show you what what happens because people often do this and it lowers a lot of the assurance in in the in the adjustment system in in this whole internal control but let's see what happens we're going to add the adjustment and so now it's going to reconcile you reconcile this account to see a report of this reconciliation you can click the reconcile report all right so we can open up the report here's our reconciliation report and so now we have the two reports this was the january report and now we have the february report if we go into the balance sheet that two cents adjustment there's there would be an adjustment in the checking account for the two pennies because it's actually going to do a journal entry and the other side they're going to dump on over to the income statement so if i go to the income statement profit and loss and i scroll down you're going to see then this reconciliation discrepancy there's the two pennies so note if i was doing bookkeeping for some or if i was doing a tax return or financial statements or something like that and remember my general concept would be the biggest internal control to get your financial statements correct to be more confident about things like your tax return is to use accounting software why because the accounting software forces you to use a double entry accounting system even if you don't know what that is and so that's what the accounting equation is it gives you a balance sheet not just an income statement and then and then the second biggest internal control is the bank reconciliation if you're doing both of those things the assurance my confidence in the bookkeeping even if it's not a professional bookkeeper goes way up however if i see this account reconciliation discrepancies on the income statement i know that some kind of fudging of the book some kind of a funny business or some kind of kind of cheating has taken place here so that even if it's a small difference two pennies is pretty small but even if it's a pretty small difference my assurance in the internal controls provided by the bank reconciliation is going to go way down right and so you probably like if you do the tax return for example you probably would want to group that in miscellaneous expenses or something you know because it looks kind of bad to say oh i have an expense account called reconciliation discrepancy which is if you had like there was a $30,000 reconciliation discrepancy expense deduction on the tax return right that might not give a lot of confidence from the irs side of things they might uh they might question that particular category of deduction just saying so if we go so that that's where they put it okay so given that let's let's see what we have here in the summary remember that this first bit is just basically summary summarizing what is on the the actual statement so we have the beginning balance additions the subtractions and the ending balance according to the bank this is the beginning balance the statement beginning balance bank statement that is the checks and payments that have cleared meaning those are the ones that we checked off because they match what is on the bank statement these are the deposits and other stuff that has cleared meaning those are the ones that we checked off and then we have our adjustment that is in there again that's a key point we're going oh that's kind of ugly right there but that gives us the statement ending balance so that recaps what's on the statement and then we have the unclear transactions so this bit right here from the statement balance to the register balance is really the reconciliation process although that two cents is now important if I was an auditor and you gave me the bank reconciliation then this number right here would also kind of stand out as an important possible number but usually the bank reconciliation is the statement ending balance the unclear transactions and then the register balance however that summary isn't enough because I need to know what the unclear transactions are so we can verify that they're you know legitimate so then down below we have the checks and payments that cleared this is stuff that will be on the bank statement so it's not really given me exactly what I want it's just kind of giving us the same information that would be on the bank statement so we could say okay there's all of that stuff and then we have the deposits another another credits cleared that's going to be all the deposits on the bank statement that we cleared off and then what we really want is the unclear checks and payments so these are all the ones that that are still not cleared so these are the ones that we would want to verify and see if they are legitimate and so how would we do that we can look in the following month in march to see if they cleared in march now it's likely that this one doesn't because something happened right again the check got lost in the mail or something or it was a duplicate check and so possibly when we start to look at this if you have a long list of unclear checks that are from you know months ago then it's you'll still be in balance you'll still be able to reconcile but it's likely that those checks are are no longer legitimate and you can clean things up by removing them however you can't delete them you got to avoid them properly so that so that basically because this five hundred dollars has already been recorded in january as supplies expense so if you if you just delete it and say well i didn't really pay five hundred dollars because the check never cleared yeah that's true but you can't like undo the january financials if you already made the financials in january so you have to basically void it in such a way that you're going to keep the amount in january and make the adjustment in the current period so so we have a a course or presentation on that if you want if you want to if you run into that problem which most people will if you're doing a full service accounting system and so then we can check and see if these cleared if they cleared and march then they're legitimate timing differences they're they're and they're adding up to exactly the difference between our books and the bank statement these are the unclear deposits if we pull out a calculator and we do some calculations we're going to see that this 8591.02 minus the 2260 is going to be the 6331 so that's 6331 is my difference is my difference here the 6331 okay so then if i if i look at some of the checks that that did clear notice that all of these were checks that were written in january january january january january which means these should match what was unclear in the in the prior month so this is the january bank reconciliation as of the end of january and if i scroll down to the unclear items here's the unclear checks so we had the 410 the 500 the 130 the 200 the 180 and the 35 those then cleared in february the 410 the 130 the 200 the 3572 was that over here 3572 and you know the 1856 and one of those didn't clear still and is still outstanding as we saw which is the is this 500 right so this 500 is still outstanding so that's going to be the so that's how these the two things are going to basically match out right there's a timing difference so you got to think when we're looking at the balances are we talking about the cleared balance which will roll forward so if i went to the next time period what's going to happen the cleared balance is going to be rolling forward as our new beginning balance and the next time period and that will be different than the bank balance and then the checks that were that had not yet cleared in the current period you would think would clear on the bank statement you know in the following period and we're just going to account for those timing differences and if we do that exactly that gives us a huge level of assurance that not only the ending balance in our financial statements over here are correct but also that all the detail in the sub ledger the transactions are correct which means the other side of the transactions are correct which means it gives us a lot of assurance over the income statement is the general idea so if i go to this first tab again i just note that oftentimes i would print this out because the report as we discussed at the end of the first reconciliation is not really like other reports meaning if you were to go in and void that check for example you might throw off the bank reconciliation report so you have to do it properly so it doesn't mess up your bank reconciliation and therefore you might want to have a hard copy that is that you're sure hasn't changed after you avoided something right you want to make sure you have a hard copy of the bank reconciliation so that if something gets deleted or changes then you can see what the bank reconciliation was and then see what got deleted or what has changed if i open up the tab over here you you'll recall that if i go into my reports and i was to type in uh reconciliation and i go into reconciliation reports it's not going to go into the reports but then jump over here to the transactions and the reconcile so it just basically put me into this reconcile tab if i go into the reconcile tab this way i have the screen that allows me to do the next reconciliation uh and move forward noting that the beginning balance is now the ending balance of the prior period the ending cleared balance on the bank statement not the ending balance on the balance sheet right it's the it's the cleared balance and then i have my reports up here for summary and the history by account if i go into the history by account then i have the the two bank rakes that i have here and i can view the report and like i say if you wanted to print the report and then upload the attachment possibly also uploading the bank statement here so that you have the bank statement that was used to help generate the bank reconciliation that might be useful uh in the event that you you have an audit or something or possibly a tax preparation at the end of the year if they're doing some in-depth looking into uh what's going on it also gives you the auto adjustment here which is another area that that really gives an indication of what's happening so again if you send this to your accountant and you have these these numbers in the auto adjustment that's going to lower the confidence on the accounting side of things you might hear something from them that might say hey you got to stop doing that that's not that's not right all right so let's take a look at the trial balance again those are the two bank rakes if i go back to the first tab or the trial balance tab here nothing new has happened or actually there was a two cents adjustment so we're two pennies different than what we had before so this is where we stand on the trial balance thus far we got the checking account here it had a change of two pennies everything else should be in essence the same as the last time and then in the income statement we ought the other side of that transaction was this reconciling discrepancy ugly account ugly account you're like ah what what has happened there but that's where it's at that's what happens so um so that is that's the bank reconciliation month number two